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CINCINNATI – The Kroger Co. today reported third-quarter sales and profit that fell below expectations. Revenue was hit by lower fuel prices as well as the sale of its specialty pharmacy business.
Kroger reported sales of $33.6 billion, down from $34 billion a year ago. Kroger reported net income of $618 million, down from $646 million.
Same-store sales, excluding fuel, rose 2.3%. Digital sales increased 11%; delivery sales were up 18% in the quarter ended November 9.
"Kroger achieved strong sales results in the third quarter led by our pharmacy and digital performance, which reflects the strength and diversity of our model,” Rodney McMullen, Kroger’s chairman and chief executive officer, said in a statement. “We continued to grow total households this quarter by delivering exceptional value for customers, with low prices, personalized offers and great quality Our Brands products, all through a seamless shopping experience."
McMullen also said the company expects the macro environment to remain uncertain in the near term. And he reiterated the company’s stance that its proposed merger with Albertsons will close and bring “meaningful and measurable benefits” to consumers.
Third-quarter gross margin was 22.9% of sales. The FIFO gross margin rate, excluding fuel, increased 51 basis points year on year. Kroger attributed the higher rate to factors including the sale of Kroger Specialty Pharmacy, which closed October 4; the performance of its Our Brands portfolio, which added 226 items in the period; and reduced shrink. The increase was partially offset by lower pharmacy margins.
Kroger said its bottom line was also affected by the settlement of claims that the company contributed to the opioid crisis, as well as costs related to its proposed merger with Albertsons Cos.
Kroger adjusted its guidance for fiscal 2024 and now expects adjusted EPS to range from $4.35 to $4.45, compared with prior guidance of $4.30 to $4.50.
Same-store sales are expected to rise 1.2% to 1.5%, compared with prior guidance of 0.75% to 1.75%.
The company still expects to generate free cash flow of between $2.5 billion and $2.7 billion and maintained its estimate for capital spending of between $3.6 billion and $3.8 billion.
